Investor Mistakes – Constant Refresh

by Investing School on April 27, 2009

With each passing day, there seems to be more intelligent ways to look at our investment portfolio. For some, the added transparency and real time information is beneficial in making important investment decisions but for most retail investors, it’s extremely hazardous.

Why? Because the more often we check, the more chances that we will be upset.

Let’s take a look at an example.
spy chart
I think you will agree that it was rough owning stocks during the last three months. However, if you are a shareholder who doesn’t really care about the ups and downs and seldom check your portfolio, you would not have noticed it. Take the SPY (ETF for the S&P 500) for example during the last three months. The starting price started with $83 per share and it is still about $83 per share after three months. Add to the fact that you received a small dividend payment during that time, not watching the investment would make you a happy investor.

Now assume you checked your portfolio holdings twice during the last three months. It’s safe to say that you were upset about your investments at least once. If you checked four times and assuming it’s spread out, there will probably be twice when you were upset. In the extreme case where you check every minute, you will be upset every other minute because stocks do not go up in a straight line.

Since the stock market never goes up every single second, do you see why it’s harder to be happy the more often you check your portfolio?

The Only Time Where Not Checking Makes Sense

If you buy individual stocks, then the only responsible way is to check and do your research constantly because any stock can go to $0. However, as you start being diversifying into the broader markets (buying ETFs that track indexes for example), the likelihood of your investments going to $0 drastically reduces.

When you buy index funds that track major indexes, you are making an investment in the economy of whole countries. With worldwide population generally up, it’s safe to say that the long term trend of major indexes always go up.

If you don’t want to be upset about your investments all the time, start diversifying into different market indices and start sleeping better.

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